Will US-China Trade Reform Put Technology at Risk?

China and the United States met recently in Washington DC for a meeting to discuss trade practices and make mutual pledges with regards to change commitments that are necessary to improve the status quo. The US-China Joint Commission on Commerce and Trade talks were initiated in 1983 when bilateral trade between the US and China was about $5 billion. Today that number has spiraled to $500 billion. In fact, the world's two largest economies are now each other's second largest trading partners.

For many years, software piracy and other intellectual property rights (IPR) have been major concerns for US software companies where there are more pirated copies than authorized and licensed versions in places like China and India. To address this issue, the Chinese Minister of Commerce Chen Deming pledged to step up the IPR law enforcement, including the software used by state-owned enterprises, banks, and government entities.

Microsoft Office immediately comes to mind as being the suite with an unprecedented number of illegal copies overseas. But where enterprise is concerned, many of the supply chain management tools used in logistics and manufacturing are also copied in spite of copy protection safeguards. These software applications and operating systems cost hundreds of millions of dollars, requiring thousands upon thousands of man-hours to develop but cost the bootleggers pennies to knock-off and distribute. So far China's ability to curb this illicit practice has not been effective.

China is going to lift the TTP requirement as a precondition for allowing market access. Both the US and China also pledged to fight policies of restraining trade through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically. In another major move, the US agreed to relax technology export controls. This is a cause of concern for US interests, but until those "controls" are articulated, we won't know how concerned we should really be.

In the past, when I have tried to send microprocessors overseas, I have had to look up the manufacturer's name and part number against the Federal Trade Commission's not-authorized for export list. If products like microprocessors, microcontrollers, and other advanced components are exported with reduced restrictions, then we may be inadvertently giving up some of our core technologies in terms of development and processing know-how.

Recently, Intel was able to double its transistor count per unit area by using a 22 nanometer technology design that stopped the gate current leakage problems previously encountered on reduced sizing efforts. This was a very costly development and effectively modified Moore's law for semiconductors. We already know we have a massive counterfeit problem with China's cloning and distributing semiconductor parts that have been falsely marked with US manufacturers' names and logos. Chinese foundries and factories can copy almost anything we can produce, and at lower cost. Given China's track record for counterfeiting products targeted to commercial, industrial, and military concerns, unless there are enforceable sanctions as a result of violations of codified trade agreements, I don't anticipate changes any time soon.

On a positive note, every agreement has to start with honest communication between or among parties, so in that light and with China's new leaders preaching "reform," I sincerely hope that they will be as good as their word.

We talk about jobs going overseas, but if we lighten up export restrictions too much, then we will need to talk about national security losses as well. Whatever is decided in these trade commission talks, there is no doubt that the Department of Homeland Security will be involved in every technology export modification proposal. I'm not as much concerned with airport security as I am with the tradeoff between export dollars and common sense.

Douglas, one thing is very evident from Chinese government ‘they speaks well and do something else’. I don’t know how they are going to treat US laws and treaties. But they had done similar thing with most of the Asian countries and always a defaulter in executing treaties and laws in correct sense.

Douglas makes a good point. To date, IP enforcement in China has been posturing, and there's no reason to belive that will chnage. I read somehwere that it has to do with the idea that in a communist/socilast socirty, there is no private property--everything belongs to the state/population. If that is the case, this is a cultural, rather than legal, challenge for US and other nations.

NO!!!! It will only make it harder for CHINA to copy our parts/units/phones. As we all know trade only goes one way. (from CHINA)

I was wondering what the people in CHINA, KOREA and INDIA, that are assembling the TV's, phones and all the other various electronics think about not being able to afford to buy these wonderful devices? Or in CHINA, have no time to watch TV! (Work, eat, sleep.)

@Jacob...You are correct. IN fact that is why one of the Chinese "pledges" was to crack down on government agencies using pirated software. The Chinese government has truned a blind eye to this practice and admitting they plan to clean house, they are tacitly admitting they know how imminent the problem is in their own ranks. I think this is a wait and see scenario and I am watching for the announcements in China Daily. If I see of a crackdown or pirate bust I will post the news. I also am going to start reading the lesser known, more contraversial papers like the Southern Weekly now garnering much US press due to the protests response by the Chinese government. Interesting stuff. I hope before the US makes any agreement concessions we have a "trust, then verify" approach so the pledges and changes are not all one way.

"For many years, software piracy and other intellectual property rights (IPR) have been major concerns for US software companies where there are more pirated copies than authorized and licensed versions in places like China and India"

Douglas, nothing going to ha happen with respect to piracy because it's a Chinese government sponsored program. Quiet sometime back, I had visited some of the government labs and universities in China; in most of the places they are using cracked/pirated versions of software. When I talked with one of the fellow he casually responded that "why should we purchase the original version for making such MNcs richer"

Perhaps the OCM's need to start getting serious about using DNA marking as a counter measure to all the counterfeits. There seems to be a lot of push back against moving forward with that in spite of the proven technology (at least according to APDN and the DLA).